Which of the following best defines marginal revenue?

• A. The difference between total revenue and total cost.
• B. The additional revenue a firm earns from selling one more unit of output.
• C. The additional profit a firm earns from producing one more unit of output.
• D. The total revenue a firm earns from all units sold.

Answer: (B)

Verified step by step guidance

1. Understand that marginal revenue (MR) refers to the change in total revenue resulting from selling one additional unit of output.
2. Recall the formula for marginal revenue: \(MR = \frac{\Delta TR}{\Delta Q}\), where \(\Delta TR\) is the change in total revenue and \(\Delta Q\) is the change in quantity sold (usually one unit).
3. Recognize that marginal revenue focuses solely on revenue changes, not costs or profits, so it is not the difference between total revenue and total cost, nor the additional profit.
4. Note that total revenue is the overall income from all units sold, but marginal revenue specifically measures the incremental revenue from one more unit.
5. Conclude that the best definition of marginal revenue is 'the additional revenue a firm earns from selling one more unit of output.'